The South African Federation of Trade Unions is once again disgusted by the MTBPS tabled in Parliament by Finance Minister Enoch Godongwana on October 30. The Minister has re-committed to the path of extremely painful austerity, which means walking the South African state off the edge of a gangplank into shark-infested waters. Only shark investors can be pleased. The Treasury identifies debt, the public sector wage bill, and what it calls economic blockages as the causes of the dire state of the South African fiscus. Therefore, it proposes several actions to remedy the situation and bring government finances on a proper footing. It suggests that spending reductions and structural reforms are the two key pillars to redeem the government finances, re-ignite growth, and set up conditions for creating jobs, thereby bringing about social prosperity.
Public Debt
In his speech, Minister Godongwana lamented high state debt levels and the repayment (‘servicing’) costs, which he says have reached unsustainable levels. Total public debt will peak at 75% of the GDP in the financial year 2025/26, which is far short of the record in the early 1930s when the same ratio was 125% – but it rapidly shrunk because of high growth (8%/year) during the World Great Depression and World War II, thanks to a new emphasis on local South African manufacturing while global trade was crippled.
The total public debt is projected to reach R6.05 trillion in the 2025/2026 financial year. And the debt servicing costs are due to reach R388.9 billion in the current financial year. The minister further argued that the debt servicing costs are such that the largest component of government expenditure goes to debt servicing. Thus, this dire state of government finance calls for the tightening of belts. This means budget cuts. Treasury, firmly influenced by the International Monetary Fund (which in 2020 lent $4.3 billion with austerity conditions attached at a time social opposition was crippled by Covid-19), re-committed itself to the attainment and maintenance of the primary budget surplus. (Aside from interest payments, all spending is less than the revenue raised.) It intends to maintain this trajectory by curtailing expenditure and maintaining the current tax collection system, e.g. refusing to raise corporate taxes above 27%, down from 52.5% in 1992. Even the G20 – to be hosted by Brazil next month – is considering windfall taxes on the ultra-rich, which the Treasury won’t even mention, much less advocate and implement.
Austerity
The Treasury intends to continue cutting the budget in ‘real’ (after-inflation) terms to reach a primary budget surplus, reining in public debt and reducing the deficit. It sees no alternatives. Neither is it interested in changing course. It seems deeply wedded to Margeret Thatcher’s dictum: “There is no alternative”.
For example, the Department of Home Affairs will cut by 12% in the next three years. The Treasury argues for reducing spending from 28% to 27.6% of GDP, but the cuts are especially painful in the ‘Social Wage’ categories of state grants. As for education, real cuts amounting to R4.1 billion will affect learning and culture.
The Social Relief of Distress grant—just R370 (far below the R442 it should be were it inflation-adjusted)—is due to expire next March. However, despite the chaos caused in May 2021 when his predecessor discontinued that grant, Minister Godongwana kept mum on whether it would be extended and increased into a Universal Basic Income Grant, as has so often been demanded.
A sick economy
Our economy is generally poorly run, and the capitalist class appears profoundly uncommitted to anything more than profit. This chart shows:
- Weaker 2024 economic growth (1.1%, to R7.4 trillion) than population increase (1.3%)
- a 4.6% inflation rate that averages away the cost-of-living crisis faced by poor and working people – even though typically, rising prices (e.g. on basic food, electricity and transport) hit the masses hardest as a share of their income
- a worsening ‘current account balance’ – indicating an outflow of funds due to massive repatriation of profits, dividends and interest to foreign headquarters – despite a recent trade surplus – with no end in sight (unless capital controls are applied)
Unemployment remains a severe crisis: “After averaging 32.4 per cent in 2023, the official (narrow) unemployment rate worsened to 33.2 per cent during the first half of the year.” The actual (expanded) rate is around 10% higher because the situation is so bad that a large share of the unemployed have given up looking for a job. But the government obviously doesn’t care, given that a paltry R19.1 billion has been allocated to address unemployment. After 2023, inflation is considered, representing a 5.5% cut in the budget, and further real budget cuts will occur in the foreseeable future.
Nor do capitalists care, as they have resumed their own capital strike, deindustrialisation and parasitic financialisation. Even the Treasury admits:“After having grown by 3.9 per cent in 2023, gross fixed-capital formation is forecast to contract by 2.5 per cent in 2024.”
With no new investment, obviously, output is also affected: “Gross value added in the manufacturing sector contracted by 0.7 per cent in the first six months of 2024 compared with the same period in 2023. The construction sector recorded a 7.8 per cent contraction for the first six months of 2024 compared with the same period in 2023 due to slowdowns in the residential, non-residential and construction works subsectors.”
The component of South African capitalism that continues to grow is the most unhealthy part: “The finance, real estate and business services sector grew by 2.9 per cent in the first six months of 2024 compared with the same period in 2023.”
Excessive debt repayments to SA’s local and foreign lenders
Treasury laments that “gross loan debt is expected to increase from R5.62 trillion in 2024/25 to R6.82 trillion in 2027/28, driven by the budget deficit and fluctuations in interest, inflation and exchange rates.” But these factors can be controlled, especially ‘fluctuations in interest rates’ – because the SA Reserve Bank can impose tight exchange controls and thereby gain space to dramatically lower its base interest rate without fear of rapid capital flight – if it chose to and was ordered to by a democratic government. Another factor that ‘drives’ the debt to ever-greater heights is the willingness to repay corrupt lenders, whose loans to Eskom (e.g. World Bank and all other lenders for Medupi and Kusile) and Transnet (e.g. China Development Bank) were made with full awareness of the dubious character of private-sector procurement partners (Hitachi and the Gupta brothers’ allies). These should be subject to a ‘debt audit’ (a standard oversight mechanism) and, in turn, to a ruling of ‘Odious Debt’ (i.e. not taken out in a manner that should be considered legally binding, as was the case for Mozambique’s recent ‘tuna-loan’ scandal involving Zurich and Moscow banks).
The ‘social wage’ shrinks.
Treasury claims that the “government will continue to prioritise the social wage for South Africa’s most vulnerable,” but this is not true. With inflation of 6% in 2023 and 4.6% (expected) in 2024, nearly all categories of social spending are in real decline:
Public-private plundering
In his MTBPS speech, the Finance Minister touted Operation Vulindlela as the panacea to the country's economic woes. This program is intended to institute ‘structural reforms’ in water provision, energy, communication, transport and the transformation of Home Affairs’ visa regime. Looking closely at these structural reforms, however, it is clear that they amount to the privatisation of much-needed services through stealth. Put differently, the much-celebrated
private-public partnerships are simply an attempt to open the provision of services to the private sector for profit. Moreover, the public carries the risk in these arrangements, and the private sector reaps the profits. In addition, since these services are indispensable for society, they are an assured market for private proprietors. This exposes the hypocritical myth of the enterprising and industrious capitalist entitled to appropriating profits as a reward for taking risks.
Most importantly, Operation Vulindlela is in line with prescripts of neoliberalism, which sees the state’s role in the economy as an enabler of profitability by firms that often plunder our fiscus. In other words, neo-liberals are not opposed to the “meddling” of the state in the economy as a matter of principle. But only when the state “meddles” on behalf of the working class through increased social spending and the provision of social safety net do the neo-liberals take offence. However, when the state meddles on behalf of capital through the underwriting of their loans, de-risking of their investments, granting generous tax breaks, incentive schemes, and beneficial depreciation regimes, the neo-liberals are happy with the state's interference in the economy. This is precisely what they call creating an enabling environment for business to thrive.
Treasury appears committed to shrinking the state further by privatisation: “reforms are expected to attract significant private-sector investment to augment public-sector resources. Over time, these changes will improve the fiscal position as well as the provision of effective and growth-enhancing infrastructure.” Yet another subsidisation of private profiteering from public goods – whether bloated procurement or ineffective partnerships – has characterised infrastructure financing ever since the outset of democratic South Africa, such as with Telkom and SAA in the mid-late 1990s, and Transnet, Eskom and Denel ever since.
Treasury claims, “PPPs, such as the Gautrain and the toll road concessions, are a tried and tested mechanism to deliver infrastructure. A PPP is a contract between the government and a private party for the development and management of a public asset in which the private party bears substantive responsibility for risk, provides a significant portion of the finance, and is compensated based on the performance and use of the asset.”
Tried and tested? In reality, because private sector regulation was terribly weak, the Gautrain never reached the promised ridership of 100 000/day and required a state subsidy (paid by Gauteng residents) of R100/trip for the roughly 50 000/day who ride the overpriced service. The main tollroad – the Gauteng highway expansion – was imposed on the province without proper consultation and was so widely rejected that the African National Congress began to lose its majority in provincial and metro elections from the mid-2010s, and 73% of users of the highways simply refused to pay. However, in both cases, the private-sector operators (from Canada and Austria, respectively) have been handsomely paid, notwithstanding their pathetic performance in design and implementation. Later, the Treasury admits what a terribly expensive failure Gauteng e-tolling has been: “The halt in toll collections on Phase 1 of the Gauteng Freeway Improvement Programme put the South African National Roads Agency Limited (SANRAL) under significant fiscal pressure. To mitigate these pressures, the national government and Gauteng Province took over R47 billion of the agency’s outstanding liabilities. In 2024/25 and over the medium term, Gauteng’s
contribution will amount to R13.1 billion, while the national government will provide R4.4 billion, with further commitments beyond this period. Gauteng has also agreed to pay R4.1 billion for the maintenance backlog.”
Load shedding by Eskom and municipalities aimed at low-income black electricity customers
Readers are meant to express relief that despite massive price increases and regular crises within Eskom and municipal power departments, there has been “no load-shedding since 26 March 2024.” However, this is only true if we ignore widespread ‘load reduction’ (i.e., load-shedding in black working class communities with a high poverty rate and thus high levels of illegal connections). Treasury apparently thinks these cut-offs – affecting everyone in a community even if they have paid their bill – can be continued indefinitely.
In a process that began with Andre de Ruyter in the winter months of the first Covid-19 wave in mid-2020, ‘revenue enhancement’ occurs through violent confrontations associated with electricity disconnection: “National government is supporting municipalities with debt relief for arrears debt to Eskom, to be written off in equal annual tranches over three years provided they comply with set conditions.. to change the non-payment culture for municipal services... Municipalities are encouraged to offer relief to indebted customers who pay current bills and transition to smart prepaid metering.” Mass poverty and extremely high Eskom price increases are not mentioned.
Climate loss and damage’ is inadequate.
Eskom continues to be the most significant contributor to climate catastrophe, and the ‘Just Energy Transition Partnership’, with $9.3 billion of mainly loan finance, is not mentioned even though it was hyped up as a solution to the necessary decarbonisation from 2021. It appears to be a myth.
Instead, the Treasury announces, “Local government allocations include R684 million for the municipal disaster recovery grant to repair flood-damaged infrastructure across several provinces, with specific amounts allocated to Eastern Cape, Free State, KwaZulu-Natal, Limpopo and Mpumalanga municipalities.” This is not enough; extreme weather events damaged billions of Rands, e.g., Cape Town flooding and dam destruction in July 2024. Moreover, we see nothing available to impoverished municipalities to allow much greater spending on climate-proofing our basic infrastructure: more robust stormwater drainage with better pumping, improved roads and bridges, and strong and well–located housing to withstand flooding and fires.
Blaming public-sector workers, who work 50% harder within understaffed departments
Public servants must service the citizenry at a rate of 1 to 32 in 1994, up 50% to 1 to 48 this year. The rate rose slowly from 2005-08, but since 2015 has been rising much faster. While the small apartheid state – which catered mainly for the small share of citizens with white skin (peaking at 5 million) – spent only 5.6% on civil service salaries, the expansion of state services
to the entire population (now 63 million) has led to a rise to only 10.4% of GDP. At the same time, the non-wage component of state services rose from 55% to 68% of all spending, revealing that the problem of the 2010s rising public debt should not be blamed on the overworked, understaffed civil service. In its own calculations, the Treasury concedes the wage bill has declined as a share of government spending from 35.7% in 2014 to 32.1% today, with a further decline projected to 31.4% in 2027/2028. Treasury contends that public sector workers are overpaid. That is, the wage bill is out of proportion with the total number of employed public sector workers as measured by global averages. While there are certain ministers, deputy ministers and some top bureaucrats whose salaries should be cut, the claim is that a “bloated wage bill” crowds out spending in other critical areas. Put differently; Treasury implies that were it not for the high salaries of public sector workers, the government would be able to increase the public sector headcount and thereby achieve practicable teacher-to-learner, nurse-to-patient and doctor-to-patient ratios. In 2024, each public servant must provide services to 48 citizens, compared to a 1 to 32 ratio in 1994. Most public sector employees are police officers, healthcare workers and teachers. Since in early 2020, Minister Godongwana’s predecessor, Minister Tito Mboweni, reneged on the last leg of a three-year wage increase that was contractually agreed to in negotiations, pay increases for most teachers have been below inflation: teachers have been underpaid by an average of R22,000 these past 4.5 years. Moreover, most teachers in South Africa are under category 14 of Relative Equivalent Qualification Value (REQV) – the minimum educational requirement for a fully qualified teacher. And these dedicated public servants constitute 66% of the country’s teachers, whose salaries have not kept pace with inflation. We are convinced that the wage increases below inflation are not unique to teachers.
Sub-imperial subsidy to mining firms in the DRC
One expensive new spending item stands out: “Higher expenditure reflects ... the South African National Defence Force (SANDF) troop deployment in the Democratic Republic of the Congo [of R2.1 billion in 2024 with 2025-26] ... increases of R3.5 billion for carry-through costs for the deployment of SANDF troops in the Democratic Republic of the Congo.” The beneficiaries are obviously not the Congolese people, but instead the BRICS+ and Western mining corporations – including several from South Africa – which do business in the Eastern DRC amid a revived mass murder following the early-2000s deaths of an estimated five million Congolese. The SANDF role has been atrocious, regrettably, given ongoing revelations of mismanagement, unreliable provisioning, internal dissent and sexual abuse of local women.
We reiterate our call that South Africa must revert to the path of Presidents Nelson Mandela and Thabo Mbeki, who prioritised diplomatic engagements and driving peace in the whole region as part of closing the chapter of genocide. Just pouring resources into the army is not a solution.
The working class is the sacrificial lamb.
For all of the Treasury’s self-congratulatory posturing, especially in bringing down the wage bill and attaining a budget surplus, the working class has borne the brunt of these policy positions and executions. That is, the budget surplus came at a heavy price for the working class since we are suffering so many cruel budget cuts. Posts in health, education and other social services that are indispensable to the working class are still not being filled, making it impossible for departments to render services.
There seems to be no end in sight for the misery that is the daily reality of the working class. Treasury committed to reducing the budget deficit from 4.75% of the GDP to 3.4% in 2027/2028. It has further committed to raising the primary budget surplus to 1.8 % of the GDP. These commitments can only mean more severe budget cuts, more inadequate provision of public services and more misery for the working class.
This situation is made worse by the Treasury’s own growth projections for the medium term. That is, the Treasury revised the real GDP growth downwards from 1.3% (in its February budget) to 1.1%, despite the surprise recovery of Eskom’s generating capacity. The Treasury maintains that in the next three years (the medium term), growth will hover around 1.8 %. This measly projected growth will not significantly reduce the current catastrophic levels of unemployment.
The South African Federation of Trade Unions will mobilise workers and the working class to resist this determined neoliberal assault waged by the Treasury with the blessings of the so-called Government of National Unity. We are already convening shop steward councils throughout the country’s provinces to analyse, assess, strategise, and put forward a programme of action to defeat a government—and the capitalist class it so diligently serves—bent on making us shoulder the crisis of its system. Anything short of a series of massive strikes and massive demonstrations uniting all four federations working very closely with all progressive working-class formations will not convince the ANC and its conservative coalition partners in the so-called Government of National Unity.
